Part six of a 6-part series on new revenue recognition guidelines.
So now you’re faced with the challenge of introducing new revenue recognition guidelines to your organization. You realize that changes to your ERP systems are required, but you may not be quite sure what the final rules and procedures will look like. And, in any case, it’s going to take some time to make the required system changes. Are you at a standstill?
Good news! There is a way to get ahead of your ERP implementation of Oracle Revenue Management Cloud Service, while evaluating the impact of the new revenue guidelines. First, it’s important to validate the new accounting rules to prepare external stakeholders with new revenue comparisons as soon as possible. The trick, then, is to use a multidimensional consolidation tool during stage 2 of the implementation to prepare reports that illustrate and differentiate revenue under new and existing revenue reconciliation methods.
Am I sure this will help? Yes. In fact, we’ve already helped many organizations successfully address a similar situation. In 2007, new revenue recognition rules set out by IFRS presented this exact challenge to many organizations (especially in Europe). Here’s what the head of Financial Reporting for a large book publisher said at the time about this transition, “…the group was able to quickly establish a unified chart of accounts in Oracle Hyperion Financial Management (HFM) covering UK GAAP, U.S. GAAP, and IFRS. It was then a simple matter to post the adjustments against these accounts as required.”
The use of a multidimensional consolidation tool, like HFM, significantly simplified the ability to report the difference in revenue results between existing methods and the new IFRS rules. And it prepared external stakeholders to understand the impact of the new IFRS framework. But it also eased the transition required for ERP updates, since the many of accounting rules were defined early in the implementation of the new IFRS revenue recognition rules.
Similarly, the task of updating your ERP systems to reflect the new FASB/IASB revenue recognition guidelines may appear daunting, but using multidimensional consolidation tools has been proven to be instrumental during the transitional stages. Once again, the impact studies created with HFM act as a control for the implementation of Oracle Revenue Management Cloud Service (RMCS) on your EBS, Fusion or other ERP. RMCS uses rules engines to:
• Identify accounting contracts,
• Identify distinct performance obligations, and classify them as over-time or point-in-time,
• Allocate the transaction price to the performance obligations in your Oracle or non-Oracle ordering, fulfillment, receivable, and other relevant systems.
Also, RMCS serves as a customer liability and asset subledger to EBS and Cloud Service General Ledgers.
Of course, as you deploy it, your detail rule setting will be subject to revision as you work on interpreting the standard. You will be able to use its iterative modeling capabilities in conjunction with HFM to analyze the impact of the guidelines on your fiscal and management reporting.
Other articles in the New Revenue Recognition Guideline series can be reviewed by clicking the respective title:
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